The UAE and Saudi Arabia ready for VAT, Other GCC Members to Follow

All the member countries of GCC mutually agreed to implement VAT Regime in January 2018. Out of the six member states, UAE and Saudi Arabia said they are all set to introduce the new taxation regime, however, it is expected that the rest of the GCC member states will implement it later.

Jihad Azour, the International Monetary Fund (IMF) director for the Middle East and Central Asia said that it is anticipated that the VAT regime will create GDP between 1.3 to 2%. Despite varying timetables, it will be implemented across all the GCC member states.

While Speaking at the launch event of IMF’s Regional Economic Outlook report in Dubai, Azour said “all” the six member countries of the GCC are dedicated to preparing to implement VAT system in the regions, that he called “an important tax reform that requires preparation” and communication with the private sector “to be ready to help them.”

He further added that “Countries, especially those with a buffer, can decide on the timing of implementing those measures.”

“Saudi Arabia and the UAE are the two largest economies, and both of them have reiterated their commitment to introduce [VAT]. Other countries can follow the suit. It’s a domestic type of tax. The impact of this tax on other countries will be fairly limited “, said Azour.

Azour added that the 5% rate of the VAT, with a large number of products and services exempted or zero-rated, will help reduce the impact on prices by 1.5 to 2%.

Azour said that the VAT will be levied at each stage of supply chain at the rate of 5 percent on goods and services. A large number of products and services will come under the exempted or zero-rated category. The upcoming tax regime will help to reduce the impact on prices between 1.5 to 2 percent.

The prime minister of Kuwait – Sheikh Jaber Mubarak Al Sabah of Kuwait government resigned from its position on Monday. Azour said in IMF discussions that Kuwait is still dedicatedly working and preparing to implement VAT Regime.

“I think we will have to wait until the government is formed, and for the government to [come up] with its economic programme, to see if VAT is still in their plan.”